On the 26 JANUARY 2020 the NZ government in partnership with industry launched the NZ construction accord. This was in response to the Treasury New Zealand Construction Conditions of Contract Report back in September 2019 and the number of Construction companies either entering into liquidation or posting large annual losses.
Procurement had and still has a significant part to play in the construction sector and the new accord highlights some key areas for procurement to modify its past behaviour when working with suppliers in the sector.
The accord introduces priority focus areas which are Industry Led, Government Led and shared.
Procurement is a Government led Priority area highlighting the focus on “Better procurement practices and improved pipeline management”
“Create a more certain, visible and better coordinated pipeline of government construction work” ( There have always been challenges for suppliers to make investments when there is no surety of future work/contracts)
“Improve government and industry procurement practices so they are more consistent, focus on good value and enable the industry to succeed” ( the key word here is good value and not lowest cost , fixed price, fixed cost as seen in the past)
The shared priority area that is another stand out for me and procurement professionals is;
Better risk management and fairer risk allocation. It is great to see the new view of not transferring all risk as you can and should never do this.
The statement ” Re-balance risk in the sector so it sits with the party best able to manage it. Improve the understanding of construction risks and their impact and costs” is a fantastic set of principles.
Over 10 years ago I was in a company contracting many construction companies. We always sat down with the supplier and asked them to price each item of risk even compensation events. As a Business we chose the risks we would take on ourselves (budgeted and put in our contingency) and also the risks we would pay the supplier for as a fixed price. A much more open, transparent and fair way to jointly share risk.
I am excited about this accord and the proof of the pudding will be in the eating ( as they say). Lets all support this approach creating a strong, vibrant, consistent, fair and sustainable construction sector for all in New Zealand